Thank you very much.
Good morning, everybody. I'm delighted to have this opportunity.
My name is Tom Keatinge, and I'm director of the Centre for Financial Crime and Security Studies at the Royal United Services Institute, a defence and security think tank in London. Prior to this I was an investment banker at J.P. Morgan for 20 years.
At the centre, we are dedicated to researching matters related to finance and security. We focus on two themes. One is financial crime policy, such as developing the relationship between governments and private sector banks in the fight against money laundering and terrorist financing. That includes enhanced information sharing. Then there are topical matters, such as ISIS financing, the role of financial intelligence in identifying foreign fighters travelling from the U.K., and the like.
Terrorist financing as it relates to ISIS has become mainstream news. The way, as has been indicated, that ISIS finances itself is from taxation, extortion, oil, and looting of antiquities. It has really become a mainstream news topic, but of course it's not a new phenomenon; it goes back for many years. Immediately following 9/11, the first shot that President Bush fired in his war on terror against al-Qaeda was to announce a strike on the financial foundations of the global terror network. From the U.K. perspective, obviously further back, the Provisional IRA created impressive financing models prior to that.
Those groups that want to move from a hand-to-mouth existence to a more planned and organized model need finance if they are to achieve their objectives. Finance is their lifeblood, but it's also their main vulnerability. Whilst individual attacks are cheap, building and maintaining an infrastructure and an enabling environment is not.
Global CTF policy, as I'm sure we know, is set at a multi-lateral level through the recommendations of the Financial Action Task Force, along with the raft of CTF-related UN Security Council resolutions, such as 1267, 1373, and the range of ISIS financing-related resolutions that we've seen in the past 12 months.
In general, terrorists can draw financing from two primary sources: internal and external. Internal financing occurs in places in which groups control territory and population. Funds are generated by taxing businesses, people, and transport, operating smuggling routes, and profiting from trade. As has been pointed out, ISIS is excelling in this regard.
Funding may also be provided from external sources: from donors, be they wealthy supporters such as those we've seen from Gulf countries, members of a diaspora community, or simply those who are inspired to support a particular cause.
Stemming the flow of external funding is clearly easier than disrupting internally generated funds, but even external disruption is challenging, if the international community fails to unite. Witness the extent to which the charcoal industry continued to finance al-Shabaab, despite international condemnation and UN Security Council resolutions to the contrary. Kidnap for ransom is another external source when international coordination has failed.
But if terrorist groups are to establish themselves, survive, and thrive, they need to develop reliable sources of financing based on the territory, population, and resources where they operate. Al-Qaeda in Iraq recognized the critical importance of finance. A declassified "lessons learned" document captured in Iraq following the 2003 invasion revealed that poor money management and irregular income were viewed as critical contributors to the group's failure.
But reporting regularly brings into question how effective global CTF efforts are. Donors fund more money to Syria; ransoms continue to be paid; trade flows, such as of oil, narcotics, and charcoal, continue to finance terrorist groups; and despite the evaluation work of the FATF and other multi-lateral organizations, the CTF regimes of many countries fall short of expectations. The extent to which terrorist groups appear to be proliferating suggests that groups are adapting to take advantage of what Osama bin Laden referred as the cracks in the western financial system.
So national and international CTF architecture must be constantly reappraised. Unlike money laundering, which represents a relatively consistent and static risk, terrorist financing risk fluctuates and evolves with geopolitical developments. It's not long ago that companies and banks were investing heavily in Turkey and Libya. Now they are exposing themselves to terrorist financing through those investments.